The Growth Strategy Propelling Five Grapes to Profitability

Sometimes making the right business decision at the right moment can be as organic as growing grapes on a vine. And since its launch in 2008, that’s what’s been fueling Five Grapes, an importer and distributor based just outside Washington, D.C., in Sterling, Virginia. The company currently has about 300 wines in its portfolio, works with 70 producers around the world, and has approximately 400 active customers.

In October 2015 the company, then based in California, with a warehouse in Sonoma and clients like the French Laundry, decided to expand its Northern Virginia offices and move its headquarters east. Its current goal is to double its portfolio; hire seven more sales representatives, which would double the number of reps; and help promote innovations involving keg wines. Five Grapes’ executive general manager, Amy Troutmiller Pettit, says the company is expected to reach profitability by this time next year. “It’s an exciting time for the company,” she says, “because we have all the pieces of the puzzle there to really start to grow even more and build on what’s already there.”

Pettit—who had built the portfolio at Diamond District Wines from 29 to 180 wines and brought that distributor, based in Washington, D.C., to month-to-month profitability in four years—began working for Five Grapes in September 2017 in a newly created position. She recently spoke to SevenFifty Daily about Five Grapes and her strategies for growing an importing and distributing business.

STAY IN THE KNOW

Sign up for SevenFifty Daily’s twice-weekly newsletter.

A Passionate Team

Five Grapes was born from a passion for wine, and as Pettit and her team have discovered, it’s that passion, combined with a like-minded staff, that helps the company succeed. Pettit says that the staff often jokes that the company was started because founder Lev Volftsun “got carried away and started buying pallets, and realized he couldn’t drink [all that wine].” She adds that the staff shares their founder’s passion. “Our team is full of sommeliers, wine educators, collectors—so we’re not just salespeople or business people.”

The company also prizes the “entrepreneurialspirit,” which, Pettit says, is why she was tapped to join Five Grapes. At Diamond District, Pettit was the only employee for its first 14 months, before she built a team of four. At Five Grapes, she currently oversees 13 employees and three warehouses located in California, New Jersey, and Virginia. The company operates in California, Washington, D.C., New York, New Jersey, Maryland, Pennsylvania, and Virginia, and has distribution partners throughout the United States. Pettit says she’s looking to expand those partners to all 50 states and Canada.

The Path to Growth

When Five Grapes moved its headquarters to Northern Virginia, the expansion of the offices and warehouse was intended to make the company less reliant on third-party help; the move meant the company could manage the warehouse itself. The move was also intended to strategically bolster operations in a market that offered more opportunity. The company now has easy access to the thriving restaurant and wine scenes in D.C..

“The wine community, the sommeliers, the trade community in this area are just fantastic,” Pettit says. “They’re incredibly supportive of one another as far as promoting each other’s restaurants, bars, and programs and being patrons themselves in the community.”

Pettit, who grew up in Indiana and lived in Chicago and Miami before moving to D.C. eight years ago, says that what makes the capital different is that even smaller restaurants now have somebody on their staff who is passionate and knowledgeable about wine. “People in this town encourage the customers to push the envelope … and get people to explore in ways that you don’t see all the time in a lot of other areas.”

While Five Grapes’ growth strategy is geared toward widening a niche market—keg wines—and taking advantage of the company’s expanded D.C.-area location, the company doesn’t want to limit itself by focusing on just one thing. Its main emphasis is its variety of wines—and building a portfolio that includes a broad range of regions. “There isn’t one region that has a monopoly on good wines,” says Pettit. “Good wines are being made everywhere.” In addition to offering recent releases, Five Grapes works with producers to secure back vintages and—in jurisdictions that have laws that allow it—with private cellars.

Five Grapes doesn’t discriminate when it comes to where it distributes its wines, either. “We’ll take business from wherever it comes,” Pettit says. “We can’t offer our whole book to everybody, but we have something for everyone.”

Price points are another key focus. To create a comprehensive book of offerings, says Pettit, “you have to make sure that you have a robust portfolio in the sub-$16 price range.” Additionally, she explains that Five Grapes diversifies its portfolio with “wines at the very low end for happy hour, and at the very high end for special occasions and bottle menus.”

Innovations

Before Pettit joined the company, Five Grapes had already made inroads in the keg wines market with its wines-on-tap program for such clients as the Kennedy Center and neighborhood wine bars in Washington, D.C., as well as Lincoln Center and the Marriott Marquis hotel in New York City. When another client, D.C.’s baseball stadium—Nationals Stadium—was looking for a better way to track and portion its keg pours, Five Grapes turned to its entrepreneurial origins.

Photo courtesy of Sestra Systems.

Volftsun, who had built his career as a tech executive, was committed to helping the stadium with its business needs, so he developed a new technology and launched Sestra Systems, an electronic tap company of which he’s now the CEO. The Sestra Systems pour-control technology works with a keg product, called KeyKeg, that uses air pressure instead of gas to move wine through the system, eliminating the need for canisters. The Sestra tap controls pouring to the exact ounce while providing key analytics to beverage managers. Five Grapes now sells KeyKegs of wine that use the Sestra technology, and the company is working with producers to create more wines to be dispensed from KeyKegs in an effort to expand its offerings and enter new markets.

“It’s kind of a chicken-and-egg situation,” Pettit says about the relationship between Five Grapes and what she calls “the most disruptive technology in keg wine.” When Sestra sells its system, it recommends Five Grapes for wine purchases. “The KeyKeg has been the biggest driver of national distribution opportunities,” Pettit says. Currently, Five Grapes has 27 wines available in KeyKegs, and it plans to increase that number to 60 by the end of 2018.

A Tried-and-true Tactic

In an industry built on customer service, Pettit believes that relationships are everything. When she discusses tactics for successfully expanding a business, she stresses the importance of being respectful of the people you’re working with, understanding the challenges they’re facing, and making yourself available to your producers and customers.

Pettit also recommends sharing information with your producers, such as what’s happening in the market and what’s helping other producers succeed. “Welcome [the producers] into your market and show them you care about their product … and you respect what they’re doing,” she says. “Be a source of solutions, not another source of frustration.”

Alicia Cypress is following her passion for wine after spending more than 20 years as a journalist at National Public Radio and the Washington Post. She writes a blog, itswinebyme.com, has received the WSET 2 certification (with distinction), and hopes to continue her studies. Talk about wine with her on Twitter or Instagram.